Unused credit - best to keep it or close it down?

earthmother

Looking for some advice please. After much hard work, I have two zero balance credit cards and two zero balance catalogue/store credit accounts that won't be used again. All have poor/sub-prime interest rates of 32%+.

My question - Is it better for my credit score for them to show as unused credit facilities (~£5000 combined), or to close them down to reduce the overall number of creditors? My score isn't the best, but is improving, and I don't want to do the wrong thing.

(As a side note, one account (JDWilliams) climbed to 59%APR during the main COL crisis! They were happy to offer to double the £1000 credit limit last year but not to reduce the interest back to their 'typical' rate! Luckily by then I only used it as a way not to pay for clothes until tried on then cleared the balance, but someone else could be trapped - the minimum payment at this point wouldn't even service the interest).

dumpster_fire2025

If they want to up the interest rate and you're holding a balance you can refuse and remain on the same interest rate, although they would likely close your account to any new spending. Certainly you can't be "trapped" by a variation in the interest rate.

CliveOfIndia

If they are high-interest cards and you've no plans to use them, then close them. If you do, your score will almost certainly drop, as it does in response to any change in credit circumstances - whether good, bad, or indifferent. But since your score plays no part in lending decisions (in fact, it's not even visible to lenders), that's neither here nor there.

The only consideration may be, do you have another card available? I'm not for one minute suggesting that anyone has to have a credit card, but they can be a useful tool if used sensibly. If you already have a "better" card for everyday use, or if you have no need for a card at all, then you may as well just go ahead and close them.

Credit cards can be useful for things like hotel reservations and car hire, as well as giving an element of protection for some purchases. But there's nothing to say everyone has to have one :-)

Sensible use of a credit card (use it routine spending, always repay in full every month without fail) can be an easy way of building up a decent credit history - which, unlike the nonsense score, is actually useful, and can be a factor taken into account by future lenders.

[ Just as a side note, if you can be disciplined enough to use a card sensibly - i.e. only buy what you can afford, and ALWAYS repay in full every month - then the APR is irrelevant as you won't be charged any interest anyway. ]

earthmother

https://forums.moneysavingexpert.com/discussion/comment/82061235#Comment_82061235

I meant trapped as in, if you can't clear the balance (or refuse the rate, ie need the facility), then it's one of those debts you will never clear. I have been there in the past, thankfully no longer.

earthmother

https://forums.moneysavingexpert.com/discussion/comment/82061320#Comment_82061320

I do have another, better, card now - in fact it was qualifying for that that's created this question as I was holding on to the other credit for emergencies - the new card is a 30% lower apr than the best of the others, and has a credit limit of about the same as the others combined (not that I'd ever need that much unless we got flooded again - ie 'real' emergencies).

MarchHare9

Never close an account !!

it affects your AAOA, average age of accounts and also reduces your overall credit limit which makes your percentage use increase

Both actions reduce your rating

CliveOfIndia

https://forums.moneysavingexpert.com/discussion/comment/82107742#Comment_82107742

It's not quite as simple as that.

Yes, long-standing and well-managed lines of credit reflect favourably on your credit history. However, if you're not planning to use a particular card again then you may as well close it. Firstly, it won't be doing anything to maintain your credit history. Secondly, most lenders will close an account anyway after an extended period of non-use and zero balance.

Percentage utilisation is not an issue if you're always repaying in full - despite what the CRAs would like you to believe. And having a large amount of available, though unused, credit can count against you - theoretically you could go out and have a massive splurge, leaving you in unmanageable debt.

So there are arguments for and against keeping unused cards open, it depends to a large extent on your individual circumstances and future intentions.

MarchHare9

google the word “history” !

it absolutely helps your rating, the longer you have an account in good standing is the holy grail of a good credit profile

percentage of credit used is also a highly factored and weighted consideration when lenders look at your application

lenders look to CRA’s when making their decisions, they do not consult bitter and twisted random consumers who keep saying ““you don’t have a credit score” , usually because theirs is low !

MarchHare9

The “Score” is the modern day bank reference, and clearly the best way to illustrate to consumers where they stand, which is why they use it !

Regardless of its actual worth or meaning, it’s pretty obvious a score of 700 is better than one of 200 !, that if you miss payments it will go down, and if you build a solid history of regular payments it will trend up

You help nobody by repeating “ You don’t have a score “

CRA’s use a score to HELP you understand your rating, so use it to your advantage

Nasqueron

https://forums.moneysavingexpert.com/discussion/comment/82107877#Comment_82107877

The score is a meaningless marketing gimmick and is entirely unconnected to what borrowing / offers you get, it plays no part in any lending decision and cannot tell you at all what your chances of being accepted.

It's "pretty obvious" only to people who buy into the CRA guff and consider paying for "improvement" services

I help everyone in the UK by repeating that you do not have a credit score because it is factually correct information.

CRAs use a score because they know humans view numbers as important and bigger numbers mean more dopamine hits. They know people will generate them money from affiliate links and paying for improvement services if they think the number will go up.

Don't fall for this myth, the CRAs want to normalise credit scoring because it gives them huge power e.g. in the US where scoring matters

MarchHare9

https://forums.moneysavingexpert.com/discussion/6675361/unused-credit-best-to-keep-it-or-close-it-down

Allow me to draw on my vast experience in this field to try to help you with your decision

Closing the account can only have a negative connotation, for the reasons I have given

Keeping the account and using it once every other month or so for a small purchase,paying in full via direct debit is the absolute best way to contribute to your credit history, and history combined with a flawless payment record is everything

NB, “You don’t have a credit score”